Micron signs preliminary $3.4B deal with Hynix

The long running will-they, won't-they saga of a tie-up between Hynix Semiconductor Inc. and Micron Technology Inc. could soon be at an end. Micron said Monday is has signed a preliminary agreement worth around US$3.4 billion that will give it Hynix's memory operations and a chunk of the rest of the company.

Micron will acquire the memory business of Hynix in exchange for about 108.6 million shares of Micron stock, under the terms of the memorandum of understanding. Based on the closing price of Micron stock on Friday, the total value of the stock is US$3.2 billion. In addition, Micron said it will pay $200 million in cash for a 15 percent stake in Hynix's nonmemory operations, which include customized chip design and manufacturing.

The deal was reached with creditors of heavily indebted Hynix. They will also provide $1.5 billion of long-term debt financing for use by Micron in its Korean operations. Hynix's creditors are in the driver's seat in the negotiations; the company has been teetering on the brink of bankruptcy for some time, and has only avoided defaulting on loans thanks to several rescue packages mounted by local banks last year, when its total debts hovered around $7 billion.

The company fell deep into debt after the price of DRAM (dynamic RAM) chips, used as main memory inside personal computers, collapsed to a level where Hynix was selling chips at a loss. Now, with a rebound in chip prices, debts have fallen and the company announced it had returned to profit. However, the creditors did not stop looking for a white knight to save the company.

While the preliminary agreement marks a major step for both companies, in talks since late December last year, it is not a done deal yet. A number of details remain to be decided before a definitive agreement can be reached, according to a Micron statement.

A spokesman for Hynix said he was not aware of the specifics of the details that remain to be worked out.

"The major terms were agreed upon but as with any deal of this size and nature, there are a variety of complexities that need to be still worked out," said Daniel Behrendt in the company's investor relations department.

The two sides have set a deadline of April 30 for approval of the deal by the Hynix Creditors Council, the board of directors of both Hynix and Micron, and company shareholders.

"I would imagine approval from the Creditors Council would be forthcoming, because they are the ones that worked out this deal, but as for the board of directors or the shareholders I don't know the status," Behrendt said. "There will probably be a lot of uncertainty until April 30 but after that day I think a lot will become clear."

If the parties approve the deal, the transaction will also be subject to clearance by antitrust authorities in the U.S. and E.U. and other parties, Micron noted in the statement.

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